Top Nvidia clients delay orders of Blackwell racks due to technical glitches

Overheating issues associated with ‘Blackwell’ racks have reportedly led Nvidia’s top customers to delay orders of the AI chip maker’s latest offering.

A rack is a structure used in data centers to house chips, cables, and other essential equipment. The news comes at a time when the Biden administration announced new AI rules that raised concerns among investors, leading to a sharp sell-off in AI-related stocks, including Nvidia whose shares went down 4% in early trading Monday.

Clients reportedly cut on Blackwell orders

It was reported that the first shipments of racks with Blackwell chips overheated and exhibited glitches in the way chips connected to one another.

According to reports, Nvidia’s major customers, that is Microsoft, Amazon’s cloud division, Alphabet’s Google, and Meta Platforms are said to have cut some orders of the chipmakers’ Blackwell GB200 racks.

Reports also show that so-called hyperscalers had each placed Blackwell rack orders worth $10 billion or more.

Due to this development, some customers are said to be waiting for an improved version of the racks or acquire the existing older AI chips from the manufacturer.

GB200 racks with at least 50,000 Blackwell chips were being planned to be installed in Microsoft’s Pheonix facilities, the report added. However, key partner OpenAI asked Microsoft to provide it with an older generation of Nvidia’s ‘Hopper’ chips as delays popped up.

Since there are other purchasers of the overheating GB200 server racks, it is now unclear how the order cuts would impact the chipmaker’s sales. The company, together with other AI-related firms is already affected by the introduction of new AI rules under the Biden administration, which include export restrictions.

The Information initially reported about Blackwell’s overheating late last year adding this was going to affect other tech firms like Meta and Google that rely on the technology for their data centers.

The Information further reported that the overheating arose from chips placed in server racks that were meant to support up to 72 units.  As part of efforts to limit the challenge, Nvidia reportedly requested vendors to repeatedly rebuild racks.

Nvidia might miss its targets

The Blackwell AI chips were first unveiled in March and were supposed to hit the market in the second quarter but faced delays in deliveries subsequently affecting client deployment schedules.

A Tom’s Hardware report indicated that the Blackwell AI chips release was already delayed by several months because Nvidia was working on a design flaw that affected production yields.

The chips combine two silicon components into one unit meant to run times quicker than past versions in jobs like chatbot answer creation.

In November Nvidia chief executive Jensen Huang said the company was on track to exceed an earlier target of recording several billions in revenue from Blackwell chips in its fourth fiscal quarter. It waits to be seen how the chipmaker will achieve this with myriad of challenges arising.

It comes as AI chip and technology exports are being further restricted by the US government, potentially hurting Nvidia’s sales.

The Biden administration is proposing new restrictions that will limit the export of advanced computer chips used to develop AI, part of an effort to preserve America’s six-to-18 month advantage on AI over rivals such as China.

The proposed framework is raising concerns of chip industry executives who say the rules would limit access to existing chips used for video games and restrict 120 countries to the chips used for data centers and AI products. Nvidia said on Monday that the proposal was not well thought after.

“The proposal is misguided and said that it threatens to derail innovation and economic growth worldwide.”

Nvidia.

Government officials said they felt they needed to act quickly to preserve US companies’ advantage over China and other nations, an edge that could be easily eroded if competitors could stockpile chips and make further gains.

Commerce Secretary Gina Raimondo said, that “it’s critical to preserve America’s leadership in AI and the development of AI-related computer chips.”

“The fast-evolving AI technology enables computers to produce novels, make scientific research breakthroughs, automate driving, and foster a range of other transformations that could reshape economies and warfare.”

A tech industry group, the Information Technology Industry Council, warned Raimondo in a letter last week that a hastily implemented new rule from the Democratic administration could fragment global supply chains and put US companies at a disadvantage.

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